Liberal budget scraps planned PQ programs, cuts taxes

ODILE NELSON

Nunavik leaders endorsed the Liberal government’s inaugural budget this week even as they kept a cautious eye on the new government’s fiscally conservative approach to governing.

Yves Séguin, Quebec’s finance minister, presented the budget on June 12. The document clearly separates Liberal fiscal policies from those of the preceding Parti Quebecois government.

As recently as March 11, former premier Bernard Landry had proposed a budget laden with tax incentives and containing $400 million in new programs. The budget was not implemented because Landry called an election the next day.

But Séguin’s budget for 2003-04 marked the beginning of the Liberal campaign promise to redefine the role of government in Quebec.

“We must adapt the State so that it is able to fulfill our ambitions. We must retarget its actions towards its essential missions. Rather than asking what the State can do for us, we should ask ourselves what we can do without it,” Séguin said in his budget speech to the National Assembly.

Séguin’s budget eliminated the new programs outlined in the proposed PQ budget and introduced billions in tax benefit reductions and cuts.

He said the drastic measures were necessary to create a balanced budget because the former PQ government had left the Liberals with a $4.3-billion budgetary shortfall, and the province still carries a long-term debt of $108.6 billion.

But, despite the cuts and Nunavik’s history of signing generous agreements with the former PQ government, the region’s leaders were cautiously optimistic.

“Generally, it was much better than we expected,” Johnny Adams, chairman of the Kativik Regional Government, said this week. “We have the budget and then the spending estimates follow next. We’re just starting to get those numbers out but we were expecting the worst and it’s better than what our expectations were.”

The minister of finance was to release spending estimates this week.

Adams said the KRG had been bracing itself for cuts to its operational budget – something the Liberal government asked the regional housing board to do this spring.

“It was asked to cut its budget by 2.4 per cent, which amounts to $700,000 and is retroactive to January. In our case, we haven’t received such a request,” he said. “Our contacts that we worked with on a daily basis had said that they were optimistic that what we had agreed to would be pushed and hopefully realized.”

Despite the shortfall inherited from the PQ and the growing debt, Séguin managed to produce a balanced budget for 2003-04 without raising personal income taxes – something the Liberal government promises to lower in the coming years.

He achieved this by eliminating the $400 million in programs promised in the PQ’s last budget, tightening government spending by $1.5 billion, eliminating $800 million in tax breaks for businesses and $700 million from government corporations, and using $809 million in federal health funding this year instead of holding it in reserve for future budgets.

Compared with the extensive cuts, the budget’s program spending is minimal. The budget will see $45.8 million in program spending in 2003-04, what the government calls a 3.8 per cent increase over last year.

More than two-thirds of this increase will go to education and health – both priorities outlined in Premier Jean Charest’s election campaign.

The budget of the ministere de la santé et des services sociaux will increase by $1.3 million, to $19.1 million for 2003-04. Education’s budget will grow by 3.6 per cent to $11.4 million.

The speech and budget documents did not offer any details on how these increases would be spent in each ministry.

Séguin’s budget offered some specifics in its tax credit reduction plan, including lowering 22 different tax credits, deductions and/or holidays by 25 per cent. It also cut a tax incentive aimed at new graduates relocating to remote regions.

Adel Yassa, director of the Kativik Regional Development Council, said cuts to tax incentives and benefits should have little effect on the region’s economy.

“My first impression, quickly? Up until now Nunavik businesses were not really accessing these exemptions. We’re not really using them so nothing gained, nothing lost for that aspect,” Yassa said.

Of greater concern, he said, was a 10 per cent budget cut to the KRDC’s operating and project budgets. But this, he said, was something the organization would cope with.

What is more worrisome, he said, is the possibility that the government may decide to dissolve the province’s regional councils – something the KRDC is already developing contingency plans for.

In his budget speech, Séguin restated the Liberal government’s commitment to increased decentralization for the region and promised to make future budgets more transparent by introducing a broader consultation process.

The budget also provided an additional $130 million for the funding of infrastructure projects committed to by the Quebec government.